26 September 2023

Are you part of the financially obese?

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Two in three Australians are overweight. Mitchell Sneddon* says that when it comes to our investment portfolios the numbers are worse.

Two in three Australians adults are overweight. That’s 67 per cent. 31 per cent of Australians were classified as “obese” in the most recent health figures.

In the long-term, being overweight can lead to an increased risk of cardiovascular disease (heart disease and stroke), type 2 diabetes, chronic kidney disease and some cancers.

As a nation of investors, the numbers are worse.

Approximately 92,000 individuals use the InvestSMART Portfolio Manager.

Of those 92K, 43K have set up a risk profile that helps them compare their asset class exposure to our Investment Committees’ ideal exposure.

On average, these investors are 70 per cent overweight on Australian shares.

Assessing the damage

The most recent burden of disease analysis by the Australian Institute of Health & Welfare found that one-third of diseases which either ended in fatal or non-fatal (living with illness) burden was potentially preventable.

Tobacco use led the way and weight/obesity was second by a narrow margin.

In our investment portfolios, the burden is measured in opportunity cost.

Opportunity cost is the potential forgone return from another opportunity.

This Australian equity exposure comes at the expense of international equities.

Our data shows us approximately 90 per cent of investors are underweight international shares.

Over the last ten years, global shares have returned 14.20 per cent pa compared to 9.34 per cent pa of the ASX 200.

The difference here is stark.

Over the course of ten years, $100K in Australian shares would grow to $244K, international would have grown to $377K.

It may sound trivial to put the two side by side, comparing health and financial health but what does your quality of life look like with an extra few hundred, $2,000 or $10,000 a year in your pocket?

For some, it may just be the difference between a domestic holiday instead of going overseas but for others, it could mean helping pay bills in retirement.

Financial stress can impact your sleep, anxiety and relationships with those around you.

What can you do?

If you’re reading this, chances are you are one of the 92K above-mentioned Portfolio Manager users and chances are, you’re overweight Australian shares and underweight international.

For those who have been investing for decades, the options for international investing were not that plentiful all those years ago and what was available was expensive and complex.

Exchange Traded Funds (ETFs) have changed this.

They’re cheap and effective in giving broad international exposure and with the majority being Australian domiciled it removes much of the complexity.

The InvestSMART International Equities Portfolio is a hand-picked selection of ETFs, designed to give you diversified exposure to the largest, highest quality businesses in the world.

The ETFs are held directly in your name, rebalanced by our investment committee and are part of the InvestSMART Capped Fee range.

This portfolio starts at a minimum investment of $10,000.

So, just like with exercising you can start adjusting your exposure slowly.

You don’t go from ten years on the lounge to a marathon on your first jog.

You use the world’s biggest companies every single day.

Your pantry, bathroom cabinet, wallet and phone are full of them.

It makes sense your portfolio should benefit from them too.

If you feel the kilos have snuck up on you over the years and you need a second opinion, look at the InvestSMART Portfolio Manager.

Now, I’m going to go for a jog and find those resistance bands I bought during lockdown.

*Mitchell Sneddon is the Head of Portfolio Services at InvestSMART Group as well as Intelligent Investor’s listed investment company and managed investment analyst.

This article first appeared at investsmart.com.au.

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